Elliott Waves. Possibility VS Certainty !
Updated
Elliott wave practitioners are sometime subject of criticism because of their apparent mistakes !.
An important point that many people may not be aware of is that " Elliott waves analysis is about possibilities and probability of each possibility not about certainties ! ". In fact, there is no false or true analysis in the world of Elliott waves (if a supposed scenario governs all rules). It is about choosing what you think as the most probable scenario but keeping in mind which conditions confirm or invalidate your analysis. If a most probable scenario fails , an Elliott practitioner immediately thinks about second most probable one ! and so on.
TSLA at current price and wave form is a clear and typical example of different scenarios possibility. We will investigate those possibilities in the following paragraphs but before that it is worth to mention that general trend of TSLA is up and as I previously published one more leg up is still ahead in broader view.
TSLA showed a decline from ATH to 886.12 with an abc zigzag form hitting a strong proposed support at confluence of former ATH, 50 % Fibo retracement and base of down going channel. ( See related idea for more details). It then made a strong bounce back but never reached a new ATH and finished it's move at 1208 just slightly above 1201.95 minor high with another 3 leg up !. This setup offers several possible scenarios. I could predict 13 of them. Please note that possible scenarios would be considerably different if TSLA made a new ATH or showed a 5 leg up move !. Different possibilities!. We had another decline from 1208 to 980 and then a bounce back to current price.
At this current position TSLA may choose different paths. Be patient. We will make a conclusion at the end of idea !. Followings are the possible scenarios as shown on the chart. We have chart of TSLA on the left side and possible scenarios on the right. Please note that right side chart is just a schematic drawing so I kindly ask you to disregard dates and prices on the right side chart:
1. Double Zigzag or Double three Correction :
In this scenario , The move up from 886.12 to 1208 is a wave X which connects two correcting forms. Next correcting pattern can be either a flat or another zigzag. Actually we have 2 slightly different scenarios in this part. Difference is second part flat correction ( Double three) price goes just slightly below the 886.12 low but in double zigzag goes much lower. Forms are the same and price targets are different.
2. Double Three :
Triangles in the second part of corrections are more common in complex corrections. In this case , a triangle is going to form after decline from 1208 to 980. and price will never go below the 886.12 ( except expanding triangles which is not common). Triangles can have several forms themselves : Contracting, Barrier and expanding. Here we just showed a contracting triangle in second part. We have 3 somehow similar scenarios here with just 1 shown .
3. Triple Three:
We may have a boring and exhausting correction continuation which is triple three. I showed on more common triple three correction on the chart with first part being a zigzag, second part being a flat and third part being a contracting triangles. Considering the third part can be a flat and even zigzag (which is not a usual one) and triangles different forms we reach to 5 possible similar scenarios here with only 1 shown.
4. Terminal wave 1 as beginning of the new impulse after end of correction at support:
Impulsive waves are always 5 wave in classic Elliott waves however , there may be 3 waves wave 1 in harmonic Elliott. It may be the case for TSLA and a move up from 886.12 to 1208 can be labeled as wave 1. in this case we are in wave 2 and another leg down is expected before making a new ATH. If you doubt about occurrence of such wave 1 see SHOP stock from 26 March 2021 to 13 may 2021. We can find many other examples in the market.
5. Antic cycle wave 1 and 2 and end of correction at support :
Normally impulsive waves are 5 leg and corrective waves are 3 to form a wave cycle. Sometimes wave forms show an anti cycle with 3 legs in the direction of main trend and 5 waves in counter trends. In this scenario TSLA has completed wave 1 and 2 and we are in up going wave 3.
6. Very rare bearish scenario with 3 waves truncated wave 5 :
First of all, this scenario is very rare and I give very very little chance to it at the moment but I certainly keep it in mind as a possible one !. Wave fives sometime show 3 legs instead of 5. several examples can be found for example see BTC from 56206 to 68769. Truncated wave fives can not make a new ATH. Occurrence of these two together has very little chance.
One may ask : So what? Are we going to be confused? What should we do now? Do we have a clear answer? Of course we have!
Except that rare scenario, all above mentioned possibilities suggest TSLA will finally make a new ATH. They all (except the bearish case) suggest taking out 1208 high as a strong buy point therefore If we do not have TSLA shares right now we can set our buy point above 1208 and if we already have shares we can hold them to capture the profit of next up going waves. This is how an Elliott practitioner makes the final decision considering all possibilities and probabilities. This one is a complicated one in short term but sometime we have much more easier process of decision making like TSM with a clear buy point above 135.5.
It is worth to note pre-requisite of all of this scenario is that TSLA has completed wave 1,2,3 and maybe 4 of larger cycle wave and will make the last wave 5. If this pre-requisite is wrong all above scenarios are wrong. For now. I am confident about the position in the larger cycle.
I spent about 10 hours to prepare this 10-min read publication so I deeply hope this to be useful and show you how can one be prepared in advance for different scenarios with the help of Elliott waves.
Good luck everyone and wish you all the best.
An important point that many people may not be aware of is that " Elliott waves analysis is about possibilities and probability of each possibility not about certainties ! ". In fact, there is no false or true analysis in the world of Elliott waves (if a supposed scenario governs all rules). It is about choosing what you think as the most probable scenario but keeping in mind which conditions confirm or invalidate your analysis. If a most probable scenario fails , an Elliott practitioner immediately thinks about second most probable one ! and so on.
TSLA at current price and wave form is a clear and typical example of different scenarios possibility. We will investigate those possibilities in the following paragraphs but before that it is worth to mention that general trend of TSLA is up and as I previously published one more leg up is still ahead in broader view.
TSLA showed a decline from ATH to 886.12 with an abc zigzag form hitting a strong proposed support at confluence of former ATH, 50 % Fibo retracement and base of down going channel. ( See related idea for more details). It then made a strong bounce back but never reached a new ATH and finished it's move at 1208 just slightly above 1201.95 minor high with another 3 leg up !. This setup offers several possible scenarios. I could predict 13 of them. Please note that possible scenarios would be considerably different if TSLA made a new ATH or showed a 5 leg up move !. Different possibilities!. We had another decline from 1208 to 980 and then a bounce back to current price.
At this current position TSLA may choose different paths. Be patient. We will make a conclusion at the end of idea !. Followings are the possible scenarios as shown on the chart. We have chart of TSLA on the left side and possible scenarios on the right. Please note that right side chart is just a schematic drawing so I kindly ask you to disregard dates and prices on the right side chart:
1. Double Zigzag or Double three Correction :
In this scenario , The move up from 886.12 to 1208 is a wave X which connects two correcting forms. Next correcting pattern can be either a flat or another zigzag. Actually we have 2 slightly different scenarios in this part. Difference is second part flat correction ( Double three) price goes just slightly below the 886.12 low but in double zigzag goes much lower. Forms are the same and price targets are different.
2. Double Three :
Triangles in the second part of corrections are more common in complex corrections. In this case , a triangle is going to form after decline from 1208 to 980. and price will never go below the 886.12 ( except expanding triangles which is not common). Triangles can have several forms themselves : Contracting, Barrier and expanding. Here we just showed a contracting triangle in second part. We have 3 somehow similar scenarios here with just 1 shown .
3. Triple Three:
We may have a boring and exhausting correction continuation which is triple three. I showed on more common triple three correction on the chart with first part being a zigzag, second part being a flat and third part being a contracting triangles. Considering the third part can be a flat and even zigzag (which is not a usual one) and triangles different forms we reach to 5 possible similar scenarios here with only 1 shown.
4. Terminal wave 1 as beginning of the new impulse after end of correction at support:
Impulsive waves are always 5 wave in classic Elliott waves however , there may be 3 waves wave 1 in harmonic Elliott. It may be the case for TSLA and a move up from 886.12 to 1208 can be labeled as wave 1. in this case we are in wave 2 and another leg down is expected before making a new ATH. If you doubt about occurrence of such wave 1 see SHOP stock from 26 March 2021 to 13 may 2021. We can find many other examples in the market.
5. Antic cycle wave 1 and 2 and end of correction at support :
Normally impulsive waves are 5 leg and corrective waves are 3 to form a wave cycle. Sometimes wave forms show an anti cycle with 3 legs in the direction of main trend and 5 waves in counter trends. In this scenario TSLA has completed wave 1 and 2 and we are in up going wave 3.
6. Very rare bearish scenario with 3 waves truncated wave 5 :
First of all, this scenario is very rare and I give very very little chance to it at the moment but I certainly keep it in mind as a possible one !. Wave fives sometime show 3 legs instead of 5. several examples can be found for example see BTC from 56206 to 68769. Truncated wave fives can not make a new ATH. Occurrence of these two together has very little chance.
One may ask : So what? Are we going to be confused? What should we do now? Do we have a clear answer? Of course we have!
Except that rare scenario, all above mentioned possibilities suggest TSLA will finally make a new ATH. They all (except the bearish case) suggest taking out 1208 high as a strong buy point therefore If we do not have TSLA shares right now we can set our buy point above 1208 and if we already have shares we can hold them to capture the profit of next up going waves. This is how an Elliott practitioner makes the final decision considering all possibilities and probabilities. This one is a complicated one in short term but sometime we have much more easier process of decision making like TSM with a clear buy point above 135.5.
It is worth to note pre-requisite of all of this scenario is that TSLA has completed wave 1,2,3 and maybe 4 of larger cycle wave and will make the last wave 5. If this pre-requisite is wrong all above scenarios are wrong. For now. I am confident about the position in the larger cycle.
I spent about 10 hours to prepare this 10-min read publication so I deeply hope this to be useful and show you how can one be prepared in advance for different scenarios with the help of Elliott waves.
Good luck everyone and wish you all the best.
Note
Now as it is clear , Scenarios number 2,4 and 5 did not happen and now are eliminated from list.Note
I can add one more scenario : Flat correction which needs 5 leg down wave from 1208 high. Lets see which pattern is going to happen.Note
As I mentioned in the text, There is a pre-requisite for all this scenario. I Published an idea which explains that pre-requisite in detail. You may be interested to take a look :
Note
TSLA made strong bounce back from 0.618 Golden Ratio Retracement. We probably end up with flat correction scenario.
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